Thursday, September 27, 2007

Facebook End Game




I am a Big FAN of Facebook and like thousands of internet enthusiast I see Mark Zukerberg as a HERO . He has created a Giant distribution Platform called Social Graph . He did it on his vision of Internet and social media . Some of his moves like Newsfeed, Opening up the platform for Third party application developers , Not doing a revenue split deal with Application developers and finally Facebook Fund are nothing short of a Masterstroke .



He has turned down the deal from Yahoo and he insist to maintain FB as an independent company . Cyberspace is abuzz with the Fear,excitement and anticipation of next move of this Boy wizard . Most Frequently Asked Question is

How will he plan and time his Exit ? Will it be through IPO or through Acquisition ?

Most of the folks think that Facebook will go public at a valuation of some where between the range of 25-35 Billions USD . Thats a lot of money .IPO Advocate says that FB will go public because there is no one who can afford to buy them at the valuation FB team want .

I think it will not be a good move for FB to go public . They should sellout .

Why ?


Short and sweet answer is Due to unrealistic expectations . When Google decide to go public and filed S1 . Their earning details came as a pleasant surprise to many folks . This is not the case with FB . No matter what number they put as their revenue , it will always be a disappointment . In a hyped environment reaction to the same hype machine will work against him and it can spiral FB to doom . This is not to say that Mark and VCs who invested in FB will not get good ROI if they go public . they will , but Mark's vision of FB will be lost .

You may say that haven't we seen this before ? with Netscape ? YES . But Netscape was a pioneer and back than there was no history behind internet , things are different today we have a DOT COM Bust behind us . Netscape too got some MAD money valuation but they have a good revenue from their enterprise clients . This is not the case with FB .


Fact is that in spite of all his greatness ,Mark can't be exempted from the BIG question about viability of FB as a business and Once FB file for IPO they will have to face this Question every quarter .They have created a seemingly"Perpetual Motion Machine" . If they stay independent they will have to feed it with something . that "something" is not apparent as of now .


Why Sellout??

I think for FB ,biggest advantage of selling is that selling out would give them a reason [ Excuse ] for course correction .

FB is a Great distribution platform ,they have done a great job by separating application and Social graph . Now they control the social graph and you and I can write application to ride over it . thats all very good . but This was not something which could not be copied by My Space or Orkut . so in order to differentiate their offering Mark played a Brilliant move by opening API for free. Whole world was at their feet.


This limelight comes with its own price tag . There were many instances where a one man company made a popular service . FB user started to use it but it was hard for the programmer to sustain it , and company went bust . Leaving FB with an unsupported application and unhappy users. Our Hero made another master stroke "FB Fund" .

What worry me is that He is doing all this with VC money . not from FB Revenues . VC Funds will not last forever and in absences of a massive revenue these Question will haunt FB too . if not now than may be some years down the line .

Opening platform for free was good move but moving away from "Free" under Marks Leadership will take sheen from his image . so they need a scapegoat . and i feel impact of such policy shift are moderate if there is a change in ownership .


We have an example of GrandCentral , a startup which offered a telephone number for life , Once you have a Grand Central Number you need not to change it when you change service provider , move to a new city or whatever . They promised "One Number for One Life " very romantic .Grand Central got acquired by Google . with in few weeks of selling out . Google changed the policy and issued new numbers to existing GC users . There was a small outcry but Google silenced them by offering money for reprinting Biz cards .

Grand Shift in ideology , little flutter , little money and things are going on smoothly since , GC is still signing new users .

If Tomorrow FB wants to take a corrective action like say a 5-10% revenue split with its existing app developer or they want to sell Flash overlay adds on small widget based TV on every profile . Given his image , doing this will be hard for Mark. So he may collect the money and run to do next venture . but if some other company say Google or MSFT do it ?

Like grand central there will be little unrest and people will abuse MSFT for greed and FB will keep going . In my opinion that will be a Good End game for Facebook exit .



Extra :

Now that i am at Crystal Ball Gazing i can't resist temptation to talk about some thing else


Who will buy FB ?? Microsoft

at What valuation 16-18 Bill.


Why do i think so ? I don't think so its a guess .

These are my view and I admit that there is a possibility that I might be wrong and Mark and his team can come up with some new strategy to address these issues and stay independent . I will be a happy man if thats the case .

Whats your take on FaceBook Endgame ?

2 comments:

Guruprasad said...

You might be right.I'd recommend sell out. I think that IPO price would be unrealistic and I personally believe that we can't compare FB with GOOG.So selling out would be the right move

datalogging said...

:]lol maybee